Research On Influence Of External Governance Mechanism On Financial Risk Of Listed Company

The scholars and firms always pay great attention to the performance and value of firms while ignoring firm risk which is an important index of reflecting the quality of a firm. The result is that some companies with so-called good performance bankrupt abruptly. Existing literatures show that corporate governance has the function of improving the performance and value of a firm. Similarly, this paper considers that corporate governance should also have risk effect, that is,it can affect firm's financial risk. This paper will break through the traditional research model of emphasizing on internal corporate governance and investigate its impact on corporate financial risk from the perspective of external governance.At the beginning , this paper introduces the theoretical basis of the external governance mechanism of financial risk, then introduces the concepts of stakeholder governance, comprehensive risk management and so on, and believes that the bank creditors, employees, suppliers, customers, external auditors, government regulators and external governance environments are not only important components of enterprise external governance mechanism, but also the key elements of affecting financial risk; after that, it analyzes the theoretical basis that external governance mechanism affects corporate financial risk and makes relevant research hypotheses; Finally, an empirical test is done to prove the underlying assumptions.Empirical results show that external governance mechanisms have an effect on financial risk to a certain extent. Including: The proportion of bank loans is negative correlated with corporate financial risk which indicates that bank debt has the certain constraint to enterprise management behavior; Corporate financial risk with employee ownership is relatively small, which indicates that the equity incentive plays a catalytic role when employees participate on enterprise risk monitoring; the ratio of suppliers'accounts payable and debt has a negative correlation with financial risk, it also suggests that the commercial credit between enterprises and suppliers is beneficial to restrict high-risk behavior of enterprises; The correlation between customer characteristic variables and enterprise financial risk is not significant which indicates that regulation of the enterprise customer is passive; External audit fees is related with corporate financial risk, but enterprise financial risk of issuing non-standard opinion is relatively high; The financial risk where exists penalties is much higher, it also reveals that the government regulation to security market is necessary; the level of development in registration is negatively related to corporate financial risk; International governance environmental variables have no obvious correlation with financial risk, this result shows that whether overseas listing can improve the financial position of listed companies in China needs further discussion.Based on theoretical analysis and empirical results, this paper finally proposes the following measures to optimize the external governance mechanisms in order to control financial risk. The measures are as follows: clearing the governance status of bank creditors; perfecting the system of employee shareholding; strengthening interaction mechanisms among enterprise, suppliers and customers; improving external audit constraints; appropriate degree of government regulation; Optimizing the external governance environment. These studies have some enlightening significance in deep understanding of external governance mechanisms and reducing financial risk through the rational optimization of external governance mechanisms.